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Nest Counters Honeywell Allegations of Patent Infringement

Nest Files Answer and Counterclaims to Honeywell Complaint

Palo Alto, California — April 12, 2012 — Nest Labs, Inc. (nest.com) today countered in court what it believes are meritless allegations by Honeywell of patent infringement in relation to the innovative Nest® Learning Thermostat™. In an Answer and Counterclaims filed today in the U.S. District Court for the District of Minnesota, Nest denies infringement and validity of the seven patents asserted in a Honeywell complaint filed in that court on Feb. 6, 2012.

“As reported in prior litigations, Honeywell has a pattern of trying to stifle new market entrants with unfounded legal action,” said Richard “Chip” Lutton, Jr., vice president and general counsel of Nest. “Instead of filing lawsuits, Honeywell should use its wealth and resources to bring innovative products to market. Nest will defend itself vigorously in court and we’ll keep our company’s focus where it should be – on developing and delivering great products for our customers.”

The following is an excerpt from the Nest Answer and Counterclaims. The complete filing is on record with the U.S. District Court for the District of Minnesota or available by request from Nest.

This lawsuit is a bald effort by Honeywell to inhibit competition from a promising new company and product in a field that Honeywell has dominated for decades. Nest Labs, with its Nest Learning Thermostat, has generated consumer and critical enthusiasm around the home thermostat—a device that most people had long since written off as a bland, dumb appliance. No less than the New York Times, Wall Street Journal, and USA Today have lauded the Nest Learning Thermostat as “gorgeous, elegant and very, very smart”; “intuitive … sophisticated … [and] right on the money”; and “hot”—unlike “the thermostat on your wall [that] is probably a blah-looking controller you face only when it’s time to warm or cool the house.”

That “blah-looking controller” on the market today is very often from Honeywell, which has long dominated the thermostat market, but has yet to generate a device that offers ordinary consumers as much as the Nest Learning Thermostat. Instead of countering product innovation with its own new products, Honeywell has a track record of responding to innovation with lawsuits and overextended claims of intellectual property violations. Indeed, in a prior intellectual property case Honeywell brought, the court noted that, “whenever Honeywell learned that a competitor was selling or planned to sell a round thermostat, it responded with threats of expensive litigation, and it managed to eliminate the competing design either by settlements or by buying the competitor outright.” Eco Mfg. LLC v. Honeywell Int'l, Inc., 295 F. Supp. 2d 854, 867 (S.D. Ind. 2003). Honeywell lost that case because the court found that its intellectual property was invalid.

Honeywell’s patents in this case are no better. Nest does not use the Honeywell patents; but even if the patents covered what Honeywell alleges, they are hopelessly invalid. They are retreads—already invented by others years before, and in some cases by other teams at Honeywell that Honeywell hid from the Patent Office when pursuing the patents in this lawsuit. For example, Honeywell’s ‘958 patent on remotely controlling temperature setpoints marks no difference from a prior art Honeywell patent (U.S. Patent 4,657,179) that expired in early 2004. Honeywell’s ‘988 patent on power stealing is also indistinguishable from another of its own patents (U.S. Patent 5,736,795) filed years earlier. Moreover, Honeywell’s idea for displaying temperature setpoints on an LCD inside a rotating ring, as shown in its ‘899 patent-in- suit, was implemented years earlier by employees of Volkswagen who ultimately abandoned their own patent application because a search found dead-on prior art. And one doesn’t need an exhaustive literature search to conclude that Honeywell’s ‘504 patent on presenting a user of an HVAC controller with “complete grammatical sentences” is not worthy of a patent, though a quick search does turn up prior U.S. Patent 5,065,813, which confirms that the ‘504 patent is invalid.

As set out more fully below in paragraphs 137-177, Honeywell’s suit is a misuse of intellectual property intended to harass Nest Labs and interfere with its commercial activities and relationships. Consistent with Honeywell’s pattern of past behavior, Honeywell’s motives are clear from a review of the merits and scope of the patents selected by Honeywell. Honeywell wants to use this lawsuit to scare a new competitor—and its customers, retailers and installers—out of what Honeywell believes is its space. But it will not work.

Nest Labs answers Honeywell’s Amended Complaint here as a first step in establishing the invalidity and noninfringement of Honeywell’s claims, and intends to follow through to correct the errors that led to the issuance of the Honeywell patents (errors in many cases caused by Honeywell’s failure to tell the Patent Office about its own prior art), and to stop, and seek compensation for, Honeywell’s latest effort to exclude competition rather than face it honestly in the market.

About Nest

Nest is focused on addressing home-energy consumption with an elegantly designed solution – one that people will actually enjoy using. Founded by Apple alums Tony Fadell and Matt Rogers, Nest brings together a world-class team with the broad backgrounds needed to deliver an amazing product that blends technology with ease of use. Nest is privately funded and based in Palo Alto, Calif. For more information, visit nest.com.

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